Wednesday, April 30, 2014

Anglicare's Rental Affordability Snapshot 2014

Anglicare's Rental Affordability Snapshot for 2014 is out today. It looks at the 62 862 rental properties across Australia advertised to let on a typical Saturday last month, and considers whether the rents are affordable for low-income households (that is, rent's not more than 30 per cent of income). The picture is grim.

Some 'highlights':
  • for single persons on Youth Allowance, just six properties (0.0001 per cent – let's call it zero) were affordable;
  • for single persons on Newstart, just 25 properties (0.0004 per cent – let's call it zero) were affordable;
  • for single persons on the Disability Support Pension, just 316 properties (0.5 per cent) were affordable;
  • for single Age Pensioners, just 625 properties (one per cent) were affordable;
  • for single parents with two kids (on Parenting Payment Single), just 533 properties (0.8 per cent) were affordable;
  • for a couple with two kids (on Newstart), just 883 properties (1.4 per cent) were affordable.
It's bleak for low-income workers too:
  • for single persons on the minimum wage, just 2 545 properties (four per cent) were affordable;
  • for a single parent with two kids, on the minimum wage and receiving Family Tax Benefits, just 1 992 properties (3.2 per cent) were affordable;
  • for a couple with two kids, on the minimum wage and FTB, just 7 639 properties (12.2 per cent) were affordable. 
This is the real housing supply problem in Australia: the lack of affordable rental for people on low incomes.

This is what happens when speculation takes over the housing market: the shape of the rental market is distorted. Higher-income households are priced out of owner-occupation and into competition with low-income households for rental properties; and higher-value (and hence higher rent) properties are brought into the rental sector by speculator landlords, while low-value (and hence more affordably rented) properties are allowed to pass out of the sector.

And this is what happens when governments positively encourage housing speculation: by not taxing housing held by owner-occupiers; by not taxing negatively geared landlords for income spent on financing their speculation; and by only half taxing speculative windfalls relative to earned incomes.

Monday, April 28, 2014

Strata renewal process lacks safeguards

The NSW State Government has said it will change the law to make it easier for strata schemes to be collectively sold and redeveloped – or 'renewed'.

Currently, it takes a unanimous decision of all owners in a scheme to do this: in other words, each and every owner has the power to veto a proposal for renewal. Under the Government's proposed changes, the votes of 75 per cent of owners will be sufficient – so, no more veto. An individual, or even a small minority of individual owners, could be forced to sell and vacate against their wishes.


This represents a fundamental change to the law. For the individual owner, their current power of veto means security. And if an owner has no other assets and few other options in the housing market, this security is an effective way of defending their housing interests. The proposed 75 per cent requirement will remove that security, and reduce the ability of individuals to defend their housing interests.

And if the payout for their unit is small, the individual owner may be faced with tough options: buy somewhere cheaper – and possibly far away from their established community; or stay local and rent – possibly at a time of life when they didn't expect to be renting and when the private rental market isn't very friendly. 

Reduce the ability of individuals to defend their own interests, and the question of legislated safeguards in the strata renewal process becomes crucial. But as the legislation is currently drafted, appropriate safeguards are lacking.

This is particularly so in the provisions for oversight of the strata renewal process by the Land and Environment Court. These provide that once a strata renewal proposal gets the approval of 75 per cent of owners, the proponents may apply to the Court for an order giving effect to the strata renewal plan.

All proponents have to do is satisfy the Court that the strata renewal plan properly discloses the proponents' interests and pays out dissenting owners (market value if the scheme is being redeveloped; a fair and reasonable proportion of proceeds if the scheme is being collectively sold). The Court does not have to look into whether the renewal will cause hardship to anyone; just whether the renewal plan includes proper disclosures and payouts.

Even if a dissenting owner lodges an objection to the application with the Court, all the Court has to look at is whether the plan includes proper disclosures and payouts – not the substance of the objection, and not any hardship that would be suffered by the dissenting owners if renewal goes ahead.

If the Government is to remove the ability of individuals to defend their interests in strata renewal processes, it must at least allow them to plead their case to the Court and have their objections and prospective hardship considered by the Court when it decides whether to make an order for renewal.


Friday, April 25, 2014

Tenancy Culture Studies: coming of age

It’s the 99th anniversary of the invasion of Gallipoli. The Tenants' Union pays tribute to the staggering sacrifice and loss of over 11,500 ANZAC troops between April 25th and December 20th 1915.


We acknowledge the significance of this day, as it gives cause to reflect upon the tragic cost of international conflict. War has left many an indelible mark upon history, and it continues to shape a range of contemporary concerns. Indeed, as we recall on April 25th every year, Australia is no exception. Today we’d like to acknowledge the impact of international conflict upon Australia’s Indigenous men, women and children – our nation’s first people are no strangers to its scars.

There’s no doubt that World War I, and the period in which it occurred, take up a significant place in history. For students of Tenancy Culture, it was a time of ferment and change in housing policy across industrialised parts of the world. At the turn of the century, as more and more people flocked towards the world’s urban centres on the trail of wages and other worthwhile pursuits, the demand for inner city housing outstripped markets’ capacity to supply. The resulting slums presented an impetus to develop ‘solutions’ from both an economic and a social point of view: policy makers were concerned with the relationship between workers’ incomes and costs, but also the perceived risk to social order that close communities of the “dangerous classes” might pose.

Indeed, there is much to say about this period of housing and welfare reform. But with the centenary of World War I drawing near, we can save those discussions for another time. After all, Australians are more inclined to reflect upon World War I – and Gallipoli in particular – in terms of its impact upon our national identity. We regard it as a sort of ‘coming of age’ of our nation. That’s not surprising, given the more formal shackles of colonisation had not long been removed, and independence granted, when we trundled our children off to war. The young nation of Australia was barely emerging from the shadows of an Empire, held together by military discipline, tradition and conquest, when the war broke out. On the ‘global stage’ of World War I, the ANZACs made a name for themselves as fit and competent soldiers. These hapless, good-natured lads showed Australia as a stoic nation; unpretentious and cavalier in the face of authority, they distinguished Australia from its English past. This much we know from the history books, and our annual observance of ANZAC day.

But an English past is not so easy to shake. When we talk of ‘coming of age’, we’d do well to recall our nation’s pre-history – the colonial years before Australia’s ‘birth’ as a federation. Today, the Institute of Tenancy Culture Studies does just that.

In a remarkable coincidence, the Swiss philosopher, diplomat and legal scholar Emer de Vettel was born 300 years ago today – April 25th 1714. De Vettel’s major work, Les Droit des Gens, was published in 1758. It was translated into English as Law of Nations in 1760, and was highly influential.


Law of Nations was essential reading for American revolutionaries throughout the War of Independence and the establishment of the United States of America. (It is believed that George Washington failed to return a copy, borrowed in late 1789, to the New York Society Library.) And when the British Empire sought to make up for the loss of its American colonies, sailing south to establish the penal colony of New South Wales, the theories and concepts outlined in Law of Nations were very much in fashion.

Law of Nations was the first comprehensive written account of international law. It served as a manual on the legal rights and duties owing from one state to another while in pursuit of expansionist goals. In Law of Nations we find the expression of Terra Nullius, as it was understood by late 18th Century colonialists. Nations had a duty to use all land available to them. They were justified in annexing unused lands when occupied land could no longer accommodate them. They could appropriate ‘savage’ lands where prior occupants did not put them to an accepted use. Acquired lands would become subject to the laws of the occupying nation.

Thus it was that New South Wales was established, and the laws of England brought into force. The High Court’s Mabo decision confirms that Australia’s Aboriginal societies functioned according to highly developed customary law, including a sophisticated system of land law that should have withstood the Law of Nations’ assumptions about possession. But this was not like anything the colonialists had ever encountered, and it was not in their interests to understand it – or to recognise it for what it was. The Mabo decision came in 1992 – more than 200 years after English colonisation. By then, Australia had long established the English systems of laws, and courts, and government, and property...

The English common law of property is a curious beast. At its heart is the concept of tenure – a system of title that dates back to feudal times. It is based on the idea that the Crown holds all land by radical title, and from this all other title derives. An interest in land could be granted from the Crown, then transferred down from one tenant to the next, in a sort of medieval pyramid scheme. Each new grantee’s tenure determined their obligation to the Crown, as well as their interest in the land. In this way, it also determined the grantee’s social rank, and established an economic order. At the top of the order, rights in property could mean wealth and influence. At the bottom, it meant toil. Labour, military or clerical service was a fair exchange for shelter and the protection of the Lord.

By the late 18th century feudalism was a thing of the past, and the law of property had evolved. The idea of radical title had declined in England to the extent that it was no longer an important legal principle. Social and economic order was based on mercantile trade and investment, and was starting to be influenced by the progress of industry. Wealth was as much about access to the means of making, buying and selling things, as it was to the ownership of land. But in 1847, in the case of Attorney-General v Brown, the Supreme Court of New South Wales confirmed that land in the new colony was held ‘of the Crown’. Radical title had been imported into New South Wales, allowing the colonists to assume sovereignty over the entire domain, and ownership of all its land.

Thus, Australia’s land law was borne of the convenient fusion of mercantilist and feudalist principles. The pathway to colonial wealth was the exploitation of productive land. For many, the possibility of owning land – to be given a grant in fee simple – was now more real than ever before. The alternative was to live ‘at the will of the landlord’ – the fragile tenure of tenancy-at-will that would have been familiar to many convicts and early Settlers within the public service. The eventual expansion of the colony meant that a seemingly endless supply of land – deemed unoccupied and in want of lawful possession – was there to be carved up and doled out to all who could make something of it. It can’t have taken long for the English born convicts to see that, if one day given their freedom, they could transcend more than just a criminal past: they could remain in the colony, claim a grant of land, and join the ranks of the Gentry in a new social order.

There is no doubt that wealth and social standing did not come without adversity, or hard work. Conventional history tells of hardship and triumph as the English adapted to a new environment. Less so, it tells of the frontier conflict as Settlers encountered resistance from the Aboriginal population – those whose lands were being carved up and fenced off, with each new expansion of the colony. And as the Settlers dug in, the Aboriginal people had to adapt to the their altered conditions, too. For Aboriginal societies, based on kinship, ties to country and the transfer of cultural knowledge from one generation to the next, the displacement from land and spread of disease was highly destructive. Ultimately, Aboriginal people had no choice but to find a place on the fringes of the new order. For those who could adapt – on either side of this colonial divide – the renewed emphasis of feudal norms was perhaps inevitable. Those who held land could become rich, powerful and ultimately free. Those who did not would have to work for them.

There’s a new study that begins here: the history of Aboriginal housing. But, having already taken up a large amount of time in reaching this point, we’ll leave that for another day too. In the meantime we’ll return to the beginning of the 20th Century, and note that while Australia’s non-Indigenous sons and daughters were unwittingly preparing for its 'coming of age' during World War I, its Aboriginal people were living subject to laws like the Aborigines Protection Act 1909 (NSW). These laws prevented Aboriginal people from owning land, and required them to live on government or missionary operated ‘reserves’ where their lives were closely regulated. Exemptions were possible, but only for those prepared to depart from their Aboriginality. For those people, segregation policies applied all the same.

But before we can conclude today's study, we must ask: can these lessons of history be applied to the circumstances of today? Are there parallels between colonial expansion and the growth of our major metropolitan centres? Our national preference for the fee simple remains intact, while the tenancy-at-will has really only been slightly modified: legal protections are now much stronger for those living in most forms of rented accommodation, but security of tenure remains weak. But colonies expanded on the back of an appetite for productive land, and it is the speculative trade of unproductive land that currently marks our pathway to wealth. This leaves us in a similar predicament to that which the early 20th Century reformers encountered: the market does not deliver affordable housing in our cities, where it is needed most.

So – what reform lies ahead? Can we change the way we treat transactions about land, without changing the age old ways we think about land entirely?

Wednesday, April 23, 2014

Can the Australian Government run out of money?

The Federal Treasurer, Joe Hockey, is worried that the Australian Government is 'running out of money'.


From the perspective of Modern Monetary Theory, the Treasurer's worries are misplaced (he'll still have worries, just not this one). The Australian Government is centrally involved in the creation of Australian money, and cannot run out of it.

For all practical purposes, the money we use in Australia is Australian dollars. Anything that's for sale here can be paid for in Australian dollars, and just about all financial liabilities incurred here are accounted for in Australian dollars.

Australian dollars don't stand for anything else: not gold, for example, and not some other currency, such as the American dollar. (You can buy these things with Australian dollars, but you don't have the right to insist on your Australian dollars being converted into gold or $US, and there's no fixed price for either – it is up to you to find a willing seller and strike a bargain.) At the end of the day, one Australian dollar will always get you... one Australian dollar.

This means there's no necessary limit on the number of Australian dollars in existence. A relative few exist physically in the form of polymer notes and copper alloy coins; very many more exist merely as electronic entries in the accounts of the institutions – the banks, and the Reserve Bank of Australia – that make up our financial system. 

And this is where our money comes from. Money is created when banks advance it to someone; it is, so to speak, loaned into existence by clerks stroking keys on the banks' computers. Apply to a bank and, if you're creditworthy, the bank will keystroke up for you an agreed-upon number of electronic dollars (in return, the bank gets from you a promise: that you will pay, over time, that number of dollars, plus interest, to the bank). These dollars, so created, sit in an account to your credit at the bank, to be transferred to other persons' accounts, in payment for whatever you're buying.

Transfers between accounts at the same bank can be settled by the bank itself. To settle transfers between accounts at different banks, banks participate in the payments system operated by the Reserve Bank. This is effected by banks maintaining reserve accounts ('exchange settlement accounts') at the Reserve Bank. These reserves ensure that payments between banks can be cleared and settled. They, too, comprise electronic dollars – keystroked into existence by the RBA, to the credit of each bank.

If, at the end of the day, a bank needs more money in its reserve account, it can borrow from another bank (in return, the first bank promises to repay the money with interest). Banks with surplus reserves not lent to other banks earn interest on them from the Reserve Bank; these interest payments get keystroked into existence by the Reserve Bank. Alternatively, the bank can borrow reserves from the Reserve Bank's liquidity facilities, which will keystroke up for the bank the necessary dollars (in return for the bank's promise of repayment or transfer of assets).

Alternatively again, it may be that a bank cannot get those reserves, because it cannot make convincing promises of repayment (because its assets are lacking: eg a bunch of loan contracts with people who are a dubious prospect). If things are so bad that not even the Reserve Bank will lend to them, it's game over for this bank. People who have deposits with the bank will be in trouble too – but they may get their money back under the Government Financial Claims Scheme, under which the Australian Government will direct the Reserve Bank to keystroke up for the claimant the appropriate number of dollars in the reserve account of their (new) bank.  

The Australian Government makes and receives payments through the same payments system, using its bank accounts – the Official Public Accounts Group – at the Reserve Bank. To make a payment to someone, the Bank keystrokes a debit against the Government's account and keystrokes a corresponding credit to the reserves of the recipient's bank. The Government receives payments into these accounts too, but it does not need prior receipts for the bank to keystroke up a payment from the accounts. (Note that the OPAG has an overdraft facility – 'strictly limited' by the Reserve Bank, but really that's a limit on government by itself).

There's the polymer notes and the copper alloy coins that the Reserve Bank issues to banks for the purposes of cash withdrawals. When a bank asks for some of these forms of money, the Reserve Bank keystrokes the appropriate debit against the bank's reserve account; and when a bank returns notes and coins to the Reserve Bank, the latter keystrokes a credit to the bank's reserve account.

Ultimately, it is only Government payments that effect a net increase in reserves in the system. Individually, banks may need more reserves (because they've increased their lending and advanced more money to people) or have reserves to spare (because they've reduced the amount they've advanced), and can make transfers amongst themselves with no net increase in reserves; but when the system overall has advanced more money, the additional reserves can only come from the Government keystroking them into existence.

As you can see, the Australian Government creates money – Australian dollars – through its spending, its lending and crediting of reserves to banks, and its issuing of notes and coins, and there's no necessary limit to how much it can create. The Australian Government cannot run out of Australian money. It issues the currency.

You'll also notice that this account has not referred to the Government's ability to impose taxes or issue bonds – and in particular, we've not referred to either taxes or bonds as the source of the Government's money (because they're not). We'll return in future posts to taxes and bonds, and just what it is they really do in an economy such as Australia's.

Tuesday, April 22, 2014

New Ministers

Congratulations to Gabrielle Upton, the NSW State Coalition Government's new Minister for Family and Community Services.





Minister Upton is responsible for social housing, but we still don't have a 'Minister for Housing' in the wider sense, so along with Minister Upton we'll regard the new Premier, Mike Baird, the new Treasurer, Andrew Constance, and the new Planning Minister, Pru Goward, as de facto Housing Ministers. Congratulations to them all.

Stuart Ayres, whom we congratulated not so long ago on his appointment as Minister for Fair Trading, remains in that role.

Congratulations too to Jai Rowell, formerly a tenants advocate at Western Sydney Tenants Service, now Minister for Mental Health and Assistant Minister for Health.

For ministers and ministerial officers looking to get on top of housing policy issues in New South Wales, we recommend Shelter NSW's conference next week on the 'possibilities and realities' of private rental housing, and the TU's own submission to the Legislative Council Inquiry into Social, Public and Affordable Housing. And keep reading the Brown Couch, of course. 

Thursday, April 17, 2014

More news on the current HNSW amnesty

Some important news on the current HNSW amnesty on undisclosed income, financial assets and property ownership: it does not apply to changes of income because of an undeclared additional occupant.


To be fair, HNSW does mention this in their fact sheet about the amnesty... sort of.

It says:
"Only reports of undisclosed income and financial assets are protected by this amnesty. No other fraudulent activity is covered and will be investigated in the usual way."
We've heard that a number of tenants have contacted HNSW to tell them about new additions to the household, thinking that the amnesty will apply. This is not surprising, given that HNSW conducted an amnesty on undisclosed additional occupants only about a year ago.

But this is not that amnesty.

Tenants who wish to get their house in order by disclosing additional occupants will be subject to the usual investigation.

Because of the way HNSW's rent setting policy works, it is always a good idea to disclose additional occupants. Having extra people living with you means your household's assessable income will go up, and your rent will go up with it.

But beware: when you do disclose your additional occupant, you'll also have to answer questions about how long they've been living with you, and how much income they bring to the household (whether or not they actually pay you anything.) If they've been living with you for awhile, you might find your rent subsidy is not only altered, but altered as of the date they moved in. By backdating a rent subsidy alteration, large debts can be created on top of the increase in your rent.

In some cases, investigations into 'rent subsidy fraud' can also lead to prosecution.

The current amnesty doesn't apply to such situations. If you're planning to tell HNSW's about an undisclosed additional occupant, at the very least you'll need to think about how you'll manage any resulting debt, as well as the higher rent.

As with all things - if you're not sure, speak to a Tenants' Advocate about your circumstances before calling in to the HNSW amnesty on undisclosed income, financial assets and property ownership.

Thursday, April 10, 2014

Important limitation to public housing amnesty

The TU is advised by Housing NSW of a limitation to its current amnesty on undisclosed income and assets.

Housing NSW says the amnesty does not apply if you have already received from Housing NSW a letter indicating that Housing NSW believes you have not properly disclosed your income and assets (Housing NSW calls this a 'natural justice letter').

In these circumstances, any disclosures you make will not be protected by the amnesty, and all the usual things may happen: Housing NSW may vary or cancel for rent rebate retrospectively; it may take proceedings to terminate your tenancy; and it may prosecute you for offences under the Housing Act.


If you think you may have received this sort of letter from Housing NSW, please seek advise from your local Tenants Advice and Advocacy Service before disclosing information under the amnesty.

If you've already disclosed under the amnesty and think you may have self-incriminated, seek advise from a TAAS.

If you've any questions about the amnesty at all – seek advise from a TAAS.